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Huawei highlights China’s expansion dilemma: espionage or profit?

Posted By on June 15, 2018 @ 09:45

The Australian government will soon [1] announce its decision on whether to allow Huawei to participate in Australia’s 5G network. It’s one of the most important policy decisions the prime minister will make this year. And it’s complicated [2]. 5G is the next generation of cellular technology. It will be faster and more responsive, and will provide us with better coverage. It will underpin [3] our future economy and will supposedly be up to 1,000 times faster [4] than current 4G networks.

So, it’s critical national infrastructure. Of course, a number of Australian and international companies want a piece of it—including state-owned and state-supported [5] companies from China that loom large in the global telecommunications field. Huawei—now the largest telecommunications equipment manufacturer in the world—is the most dominant of these.

If all things were created equal, Huawei would be a competitive participant in Australia’s 5G network. But all things aren’t equal, particularly when it comes to critical infrastructure. From the Australian point of view, there are geopolitical and security issues to consider. Much of the public debate has zeroed in on cybersecurity, the potential for backdoors and the need to check Huawei’s equipment and software [6]. Those are serious concerns, but there’s an issue far bigger than Huawei itself.

Ironically, China’s own laws make Huawei unsuitable to participate in Australia’s 5G network. As first detailed in The Strategist [7] by ICPC fellow Elsa Kania, Article 7 of China’s 2017 National Intelligence Law (国家情报法) declares [8]:

All organizations and citizens shall, in accordance with the law, support, cooperate with, and collaborate in national intelligence work, and guard the secrecy of national intelligence work they are aware of. The state will protect individuals and organizations that support, cooperate with, and collaborate in national intelligence work.

A company might have the best of intentions—work hard, foster a good reputation, make a profit—but this law undercuts those intentions by making it clear that Chinese organisations are expected to support, cooperate with and collaborate in national intelligence work. They must also keep the intelligence work they’re aware of a secret. In return, the Chinese state will protect them.

How can Australia policymakers working on 5G sidestep this declaration? The law obviously could be used to Australia’s detriment. [9]

The law makes things surprisingly easy for the Australian government. It provides the prime minister with uncompromising evidence that Huawei—and any other Chinese company for that matter—isn’t a suitable participant in the 5G network and other public infrastructure [10].

Of course, the timing of the announcement will be tricky. The bilateral relationship isn’t in a great place, and the government’s announcement will be another major pothole [11]. It will, of course, kick off a new series of Global Times articles [12] and tweets [13] criticising and threatening the government and Australian businesses [14] (thankfully, though, there are creative options [15] to help break this Australia–China media feedback loop [16]).

There may be moves to double-down on the Chinese Communist Party’s famed ‘boycott diplomacy [17]’ that seeks to coerce policy change in foreign governments by punishing private industry. Or we could see a consumer-led netizen boycott spread online—the [18] examples [19] of [20] which [21] are [22] endless [23]—targeting Australian products or companies. Governments and global industry should be prepared to be on the receiving end of such boycotts. They’re common, and just another input that needs to be considered as part of any company’s risk matrix for operating in China. We’ve seen versions of such boycotts targeting products in Australia (wine [24]), Norway (salmon [25]), Japan (cars [26], electronics [27], retail [28]), the United States (fast food chains [29]), France (supermarkets [30]), South Korea (supermarkets, cars, entertainment, tourism [31]) and Taiwan (tourism [32], students [33]).

But the decision—particularly if the announcement references this law—will be hard to credibly refute by the Chinese government and its state-owned media. After all, the government has only itself to blame. By introducing expansive and aggressively ambitious intelligence laws, it has locked in a potentially powerful intelligence-collection system. More organisations and individuals collecting material on behalf of the state means a more diverse collection and more intelligence feeds flowing into government. That’s great news for the state, particularly China’s intelligence analysts and national security policymakers.

But it’s a double-edged sword for China. Requiring individuals and organisations to support, cooperate with and collaborate in intelligence activities, of course, comes at a cost. And that cost will be the international expansion plans of Chinese companies—state-owned and private— which have been well and truly boxed into a corner with this law. The CCP has made it virtually impossible for Chinese companies to expand without attracting understandable and legitimate suspicion. The suspicion will be deeper in countries that invest in countering foreign interference and intelligence activities. Most developed countries, including Australia, fall into that category.

This fascinating tension—between commerce and intelligence collection—will only intensify and will eventually force some tough decisions. What’s more important to the CCP? Using Chinese companies operating overseas to collect intelligence or supporting the international success of those companies?

A little from column A and a lot from column B is probably the ideal mix for any government. But betting big and hoping for roaring global success on both fronts is a crucial mistake. The two just don’t go hand in hand. There will be a loser. And this year, at least in Australia, it will be Huawei.

Article printed from The Strategist: https://www.aspistrategist.org.au

URL to article: https://www.aspistrategist.org.au/huawei-highlights-chinas-expansion-dilemma-espionage-or-profit/

URLs in this post:

[1] will soon: https://www.afr.com/news/huawei-faces-5g-veto-amid-national-security-concerns-20180613-h11c0z

[2] complicated: https://www.afr.com/news/industry-pushes-back-against-huawei-ban-proposal-20180613-h11cwx

[3] underpin: https://www.communications.gov.au/file/31661/download?token=CgV_CF5x

[4] up to 1,000 times faster: https://theurbandeveloper.com/articles/5g-faster-than-nbn-coming-to-aus

[5] state-supported: https://www.aspistrategist.org.au/much-ado-huawei-part-1/

[6] equipment and software: https://www.innovationaus.com/2018/06/Huawei-Oz-boss-hits-at-pollies

[7] first detailed in The Strategist: https://www.aspistrategist.org.au/much-ado-huawei-part-2/

[8] declares: http://www.npc.gov.cn/npc/xinwen/2017-06/27/content_2024529.htm

[9] to Australia’s detriment.: https://www.afr.com/opinion/columnists/the-technical-reasons-why-huawei-too-great-a-5g-risk-20180614-h11e3o

[10] other public infrastructure: https://www.perthnow.com.au/technology/telecommunications/federal-agencies-clear-huawei-for-perth-transport-authority-contract-ng-b88866816z

[11] major pothole: https://www.lowyinstitute.org/the-interpreter/beijing-way-trade-punishment

[12] articles: http://www.globaltimes.cn/content/1103647.shtml

[13] tweets: https://twitter.com/HuXijin_GT/status/998875862379315201

[14] Australian businesses: https://www.sbs.com.au/news/china-consumers-may-vent-anger-at-aust

[15] creative options: https://www.aspistrategist.org.au/walking-the-walk-on-values-with-china/

[16] feedback loop: https://www.aspistrategist.org.au/breaking-the-australia-china-media-feedback-loop/

[17] boycott diplomacy: https://www.ft.com/content/c7a2f668-2f4b-11e7-9555-23ef563ecf9a

[18] the: https://kami.com.ph/27585-look-chinese-netizens-channel-anger-ph-mangoes.html#27585

[19] examples: https://www.whatsonweibo.com/japan-radar/

[20] of: https://gbtimes.com/chinese-netizens-boycott-south-korean-music-awards-as-hong-kong-and-taiwan-listed-as-countries

[21] which: https://www.reuters.com/article/us-china-marriott/shanghai-temporarily-closes-marriott-website-in-china-after-questionnaire-gaffe-idUSKBN1F00UT

[22] are: http://www.taipeitimes.com/News/front/archives/2018/03/29/2003690250

[23] endless: https://medium.com/shanghaiist/chinese-netizens-call-for-boycott-of-balenciaga-after-paris-shopping-mall-scuffle-6ce62165bbbc

[24] wine: https://www.smh.com.au/business/the-economy/red-tape-protest-china-s-tactical-trade-payback-20180518-p4zg39.html

[25] salmon: http://journals.sagepub.com/doi/abs/10.1177/0920203X15625061

[26] cars: https://www.theguardian.com/business/2012/oct/09/japanese-car-sales-china-islands-dispute

[27] electronics: https://www.reuters.com/article/us-japan-china-companies/discretion-pays-for-japanese-brands-in-china-amid-territorial-dispute-idUSBREA4K16M20140521

[28] retail: https://www.thestar.com.my/news/regional/2005/04/07/chinese-boycott-japanese-products/

[29] fast food chains: https://www.marketwatch.com/story/angry-chinese-crowds-are-protesting-against-kfc-apple-heres-why-2016-07-20

[30] supermarkets: http://www.spiegel.de/international/business/consumer-backlash-france-s-carrefour-feels-china-s-ire-a-549124.html

[31] supermarkets, cars, entertainment, tourism: https://www.ft.com/content/0f534820-a402-11e7-9e4f-7f5e6a7c98a2

[32] tourism: http://time.com/4574290/china-taiwan-tourism-tourists/

[33] students: http://www.scmp.com/news/china/policies-politics/article/2096140/beijing-cuts-number-students-allowed-taiwan

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